MONITARISM & NGDP TARGETING

The solution to capitalist inequality: Radical marketsDalibor Rohac | The American Interest The problems the radical Left seeks to address are real. But their solutions are not nearly radical enough. Local experiments, rather than irreversible federal schemes, are the way to go.

In the past two years, the President and Congress have enacted $2.5 trillion in tax cuts and another $2.5 trillion in higher discretionary spending (assuming both are fully extended over the decade). Annual budget deficits are about to surpass $1 trillion and are on their way to $2 trillion within a decade. The national debt has more than doubled from $10 trillion to $21 trillion since 2008, and is projected to surpass $37 trillion within the next decade. Over the next 30 years, the Congressional Budget Office (CBO) forecasts an $84 trillion avalanche of new debt. Read more here....

Trade, Technology, And Jobs: How To Think About Free Tradeby John B. Taylor via PolicyEdThe consequences of free trade are very similar to what happens when a new technology is invented. In both cases goods and services get better and more affordable for everyone, new jobs are created, and some jobs are replaced. So, the next time someone proposes new trade barriers, imagine instead that they had proposed outlawing a new invention.

The link between wages and productivity is strongMichael Strain | Expanding Economic Opportunity for More Americans This paper outlines the wage-setting process and the conceptual issues of critical importance to any empirical investigation of the link between compensation and productivity. It presents recent evidence suggesting that the link between productivity and wages is strong.

Is All Economic Growth Created Equal?Oren Cass, The BulwarkImagine a button that would instantly double the productivity of the labor market’s most productive quintile, but also cause the least productive quintile to drop out of the labor force. Would you push the button? The top quintile is more productive to begin with, so the gain from doubling its productivity exceeds the loss at the bottom—the tradeoff leaves our economy more productive and output higher. Read more here....

Modern Monetary Theory is a joke that’s not funny Michael R. Strain | Bloomberg Opinion The core assertion of Modern Monetary Theory -- that a government that prints its own money can always pay its bills -- is correct. Yet advocates of MMT fail to fully grapple with the inflationary risks that would come with treating government debt as wholly unimportant. With the central bank dedicated to financing the government, the task of managing inflation would become a fiscal matter, creating economic, political, and distributional problems far greater than those MMT seeks to solve. These issues are further discussed in this week's "Political Economy Podcast" with AEI scholars James Pethokoukis and Stan Veuger.

What is Modern Monetary Theory?James Pethokoukis and Stan Veuger | "Political Economy Podcast" On his latest podcast, James Pethokoukis talks Modern Monetary Theory with Stan Veuger. The two discuss why MMT has suddenly become so popular, the theory’s intellectual origins, whether it has anything new to say about economics, and the political and economic risks of using the theory as a basis for monetary — and, consequently, fiscal — policy.

Why Modern Monetary Theory is an unserious idea for an unserious timeJames Pethokoukis | The Week Is Modern Monetary Theory a fiscal cheat code for funding major expansion and creation of federal spending programs? The core observation -- that the government can always print money to pay its debt -- is true. But in practice MMT represents a mirror version of the Laffer Curve obsession seen among some on the right. Ultimately, policy decisions involve choices and trade-offs — and those presented under MMT are not appealing.

Debt denial is a threat to AmericaDesmond Lachman | The Wall Street Journal Contrary to the claims of Modern Monetary Theory's advocates, deficits do matter. There is no guarantee that the US government will be able to borrow at low rates indefinitely, and with the deficit currently exceeding 5 percent of gross domestic product (GDP) and the debt exceeding 100 percent of GDP, the debt-to-GDP ratio is set to increase indefinitely. Increased deficits will lead investors to demand higher yields on government bonds, especially if they see higher risk of inflation or default. Taking these facts into account, MMT is a recipe for fiscal ruin.

Modern Monetary Theory and policyStan Veuger | AEI Economic Perspectives Proponents of so-called Modern Monetary Theory emphasize that governments can always avoid defaulting on existing obligations denominated in a currency they themselves create. In many instances, they extrapolate from this correct observation to sweeping claims about the proper size of government and the role of monetary and fiscal policy. To the extent that these claims go beyond those of mainstream monetary doves, policymakers would be unwise to rely on them.

Do Economic Booms Die Of Old Age?quoting Robert E. Hall via BloombergBen Bernanke got a big laugh from economists in Atlanta on Jan. 4. A few minutes after Janet Yellen said, “I don’t think expansions just die of old age,” he replied, “I like to say they get murdered.” All right, not that funny. But the nerdy repartee between the past two Federal Reserve chairs at the annual meeting of the American Economic Association reveals how central bankers think about recessions—and says something about how likely it is that the U.S. will tip into one over the next year.

The Reinvention Of Economics After The Crashquoting John H. Cochrane via QuartzEconomics is searching for its third act. Over the past few decades, the field had become more self-assured, harnessed more mathematics, and moved further away from social sciences such as psychology in the direction of hard sciences such as physics. Macroeconomists, who are concerned with understanding the economy in its broadest sense, were in a self-congratulatory mood.

Financial crises: Past and futureCarmen M. Reinhart | AEI Economics Working Paper Series This working paper, based on Carmen Reinhart's Adam Smith Lecture at the 60th National Association for Business Economics Annual Meeting in September 2018, takes a selective global tour of some of the prominent economic and financial risks in advanced, emerging, and low-income developing economies.

This article, based on Carmen Reinhart’s Adam Smith Lecture at the 60th National Association for Business Economics Annual Meeting on September 2018, takes a selective global tour of some of the prominent economic and financial risks in advanced, emerging, and low-income developing economies. She briefly discusses some persistent medium- to long-term concerns about the rising levels of US public debt, the tensions that arise from internal economic objectives, and the external pressures associated with the US dollar’s role as the world’s principal reserve currency. The tour starts with an assessment of the 2008–09 global financial crisis’ recovery experience.

Carmen Reinhart and Vincent Reinhart argue that there remains a central warning of 2008: Countries should never grow complacent about the risk of financial disaster. The next crisis will come, and the more the world forgets the lessons of the last one, the greater the damage will be. The authors ask, 10 years after the financial crisis, what have we learned. They believe the most disquieting lesson is how complacent politicians, policymakers, and bankers had grown before the crisis and how much they had forgotten about the past. The crisis also proved that inflation can be too low. The real tragedy, however, is that none of these lessons is new; that the world had to relearn so many important lessons during the last crisis suggests that it will forget them again.

Economic Manifesto Released In Indiaquoting Raghuram Rajan via Tehran Times (Iran)Top Indian economists, including former Reserve Bank of India governor Raghuram Rajan, have released an economic manifesto for India, meant to spur debate and discussion.

What's Behind The Wall Street Journal Management Top 250with Amit Seru via The Wall Street JournalOf the five dimensions of a company’s performance that make up our Drucker Institute rankings, innovation has stood out from the beginning as the toughest for us to capture. Not that sizing up the other four areas—customer satisfaction, employee engagement and development, social responsibility and financial strength—is child’s play.

Maeve Cohen On Rethinking Economicsby Russell Roberts via EconTalkMaeve Cohen, Co-director of Rethinking Economics, talks with EconTalk host Russ Roberts about her organization and its efforts to change economics education. Cohen, who co-founded the Post-Crash Economics Society, argues for a more human-centered approach to economics that would be less confident in its policy prescriptions and more honest about the significance of its underlying assumptions.

The Digital Key To Inclusive Growthby Chen Long, Michael Spence via Project SyndicateSo far, it seems that the rise of the digital economy has already contributed to a broad pattern of income and job polarization in the developed world. Yet digital technology can play a powerful role in fostering inclusive growth patterns, especially in developing economies.